Exhibit 7.12
Use the Information Below for the Following Problem(S)
$\begin{array}{cc}
\text { Asset } 1 & \text { Asset 2 } \
\hline E\left(R_{1}\right)=.12 & E\left(R_{2}\right)=.16 \
E\left(\sigma_{1}\right)=.04 & E\left(\sigma_{2}\right)=.06
\end{array}$
-Refer to Exhibit 7.12.Calculate the expected return and expected standard deviation of a two stock portfolio when r?,? = -.60 and w? = .75.
A) .13 and .0024
B) .13 and .0455
C) .12 and .0585
D) .12 and .5585
E) .13 and .6758

Question

Exhibit 7.12
Use the Information Below for the Following Problem(S)
 $\begin{array}{cc}
\text { Asset } 1 & \text { Asset 2 } \
\hline E\left(R_{1}\right)=.12 & E\left(R_{2}\right)=.16 \
E\left(\sigma_{1}\right)=.04 & E\left(\sigma_{2}\right)=.06
\end{array}$
-Refer to Exhibit 7.12.Calculate the expected return and expected standard deviation of a two stock portfolio when r?,? = -.60 and w? = .75.
A) .13 and .0024
B) .13 and .0455
C) .12 and .0585
D) .12 and .5585
E) .13 and .6758

Quizplus · Accepted Answer

The correct answer is A because the expected return of the portfolio is the weighted average of the expected returns of the two assets, and the expected standard deviation of the portfolio is the square root of the variance of the portfolio, which is the weighted average of the variances of the two assets plus the covariance between the two assets.

Exhibit 712 Use the Information Below for the Following Problem(S)

Exhibit 712
Use the Information Below for the Following Problem(S)